Federal Reserve Announces New Credit Card Protections

The Federal Reserve announced new rules and credit card protections yesterday. It is the grand finale of the CARD Act. Capping late fees and providing possible relief from rate increases. These rules go into effect on August 22nd.

Under these new rules:

• There are limited and conditional protections against interest rate increases. Any increase in your APR must be re-evaluated by your issuer every six months, including any increases that took place after January 1, 2009. If appropriate, the issuer must reduce your rate within 45 days after completing the evaluation. Ideally, lenders will reduce rates if the reasons for the increases no longer exist.

“Terms such as ‘evaluate’ and ‘reduce if appropriate’ leave wiggle room for issuers. Credit card companies need the income from these higher interest rates. That is one reason why many cardholders received significant rate increases before the CARD Act went into effect. It would be surprising if issuers re-evaluate and restore rates to previous levels for a large number of cardholders,” says Bill Hardekopf, CEO of LowCards.com and author of The Credit Card Guidebook.

• Most late payment fees will be capped at $25. However, the fee can be as high as $35 if one of your last six payments was late or if the issuer can prove the costs incurred justify a higher fee.

• The penalty fees cannot exceed the dollar amount of the consumer’s violation. Hence, a credit card company can no longer charge a $39 fee when a consumer is late making a $20 minimum payment. In this example, the fee cannot exceed $20.

• Cardholders can’t be charged more than one fee for a single event or transaction.

Credit card companies can no longer charge an inactivity fee on cardholders who don’t use their card.

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About the Author: Bill Hardekopf

Bill Hardekopf is the CEO of LowCards.com a free, independent website that simplifies the confusion of shopping for credit cards and helps consumers easily compare cards in a variety of categories.

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